FINDINGS OF THE NATIONAL RISK ASSESSMENT ON MONEY

LAUNDERING AND TERRORIST FINANCING OF MAURITIUS

FATF RECOMMENDATION 1

Countries should identify, assess, and understand the money laundering and terrorist

financing risks for the country, and should take action, including designating an authority

or mechanism to coordinate actions to assess risks, and apply resources, aimed at

ensuring the risks are mitigated effectively

KEY CONCEPTS IN THE NRA CONTEXT

Risk – risk is a function of three factors: threat, vulnerability and consequence

Threats – actions taken by criminals to abuse the financial system to facilitate money

laundering or terrorist financing

Vulnerabilities – the weaknesses or gaps that can be exploited by the threat or that may

support or facilitate its activities

Consequences –impact or harm that ML or TF may cause.

The assessment of consequences is included in the assessment of threats and

vulnerabilities as opposed to being treated as a separate independent factor.

DATA COLLECTION PROCESS AND SOURCES OF INFORMATION

1. Exercise started in 2017 and was completed in August 2019

2. Assessment Period: 2014-2017 but updates provided where possible

3. Sources of Information: Primary and Secondary sources

� Data/Statistics from the relevant authorities

� Intelligence

� Information gathered from surveys administered to the private sector

� Information gathered from surveys administered to competent authorities

� Focus group discussions with relevant competent authorities

� Focus group discussions with the private sector

� Local and international reports

� Local and international press articles

� Open source information

ASSESSING OVERALL NATIONAL ML RISK

ML Threat Assessment

� Based on the assumption that ML threat is a function of “proceeds of crimes”.

� The aim is to establish:� Which predicate offence is most prevalent

� How the ML threat materializes within different sectors (To determine Sectorial ML risks)

� Establish the ML cross-border threat = laundering of proceeds of crime committed outside Mauritius + the

laundering of domestically generated proceeds of crime in other jurisdictions

ML National Vulnerability Assessment

� Assesses the vulnerability of a country to ML offences.

� The level of National ML vulnerability = Level of overall sectorial ML vulnerability + National ability of

the country to combat ML.

Overall ML Risk = ML Threat + ML National Vulnerability

ASSESSING OVERALL NATIONAL TF RISK

TF Threat Assessment

The extent of the terrorism financing threat in Mauritius was based on:

� sources of terrorist threats

� direction of terrorism financing funds

� sources and channels that are being used for terrorism financing.

TF National Vulnerability Assessment

� TF Vulnerability = The strength of the controls that are in place to detect and counter TF.

TF Risk = TF Threat + TF Vulnerability

ASSESSING SECTORIAL ML RISKS

Sectorial ML Risk = Sectorial ML Threat + Residual ML Vulnerability of the Sector

ASSESSING SECTORIAL ML RISKS

Sectorial ML Threat Assessment

� How the ML threat materializes within different sectors (Determined by the Threat Assessment Team)

Sectorial ML Vulnerability Assessment

� Inherent vulnerability variables: consider specific features and users of products/sub-sectors under assessment.

1. Total Size/Value/Volume

2. Client base profile

3. Use of agents

4. Existence of investment/deposit feature for the product

5. Level of cash activity

6. Frequency of international transactions

7. Availability of cross-border use of the product

8. Other vulnerable factors- Anonymous use of product

- Use of the institution type in market manipulation, insider trading, or securities fraud

- Difficulty in tracing the transaction records

- Existence of ML typologies on the abuse of the product/ Other FI Category/each DNFBP

- Use of the product/Other FI category/each DNFBP in fraud or tax evasion schemes

- Non-face-to-face use of product

- Other relevant features

ASSESSING SECTORIAL ML RISKS

Sectorial ML Vulnerability Assessment (Cont.)

� General AML controls: relate to the strength (in terms of quality and effectiveness) of AML controls in relation to the

specific sector under assessment

1. Comprehensiveness of AML Legal Framework

2. Effectiveness of Supervision Procedures and Practices

3. Availability and Enforcement of Administrative Sanctions

4. Availability and Enforcement of Criminal Sanctions

5. Availability and Effectiveness of Entry Controls

6. Integrity of Staff

7. AML Knowledge of Staff

8. Effectiveness of Compliance Function (Organization)

9. Effectiveness of Suspicious Activity Monitoring and Reporting

10. Level of Market Pressure to Meet AML Standards (examined by the Banking and Insurance sector only)

11. Availability and Access to Beneficial Ownership Information

12. Availability of Reliable Identification Infrastructure

13. Availability of Independent Information Sources

� The residual ML vulnerability rating: is the effect of controls (General AML Controls) on the inherent vulnerability

associated with the sector under review.

LIMITATIONS AND CHALLENGES

General absence of AML/CFT data collection system:� All AML/CFT agencies involved in the exercise did not keep AML/CFT statistics in a manner which

allowed for the prompt conduct of the assessment

� In addition, the length of the AML/CFT operational chain made it challenging to track specific

reports.

� In the absence of specific data, teams organized focus group discussions to make an informed

judgment.

Information Sharing:� Reluctance to share information because of confidentiality reasons.

� Appropriate legal amendments were made to resolve this issue.

MONEY LAUNDERING THREATS IN

MAURITIUS

CRIME RATES IN MAURITIUS

1. The overall crime rate in Mauritius is Low.

2. Overall reported offences in 2017 were linked to:

� crimes (2%);

� misdemeanours (14%); and

� Contraventions (84%), the majority of which were related to road traffic offences.

Source: Statistics Mauritius

SUMMARY OF DOMESTIC MONEY LAUNDERING THREATS

High ML Threat Medium-High ML

Threat

Medium ML

Threat

Medium-Low Threat Low Threat

� Drug Trafficking

� Fraud

� Illegal Bookmaking

� Robbery/Theft

� Tax Crimes

� Corruption

� Trade-Based

ML

� Illegal Fishing

� Insider Trading/

Market Manipulation

� Trafficking in human beings

and migrant

smuggling/Sexual

Exploitation

� Extortion

� Illicit Arms

Trafficking

� Illicit trafficking in

stolen and other

goods

� Counterfeiting

currency

� Counterfeiting and

piracy of products

� Murder, grievous

bodily injury

� Kidnapping , illegal

restraint and hostage-

taking

� Smuggling and

Piracy

SUMMARY OF EXTERNAL MONEY LAUNDERING THREATS

FRAUD - The ML threat associated with Fraud is therefore considered HIGH.

1. Mauritius may be subject to abuse for money laundering purposes by persons who attempt to move proceeds of frauds committed elsewhere through

Mauritius.

2. There has been a number of cases in the past where suspected fraud proceeds were received.

� Types of fraud include boiler room scams, pension fraud and securities fraud.

3. Given that Mauritius is an international financial centre, it is more exposed to proceeds emanating from white-collar criminal activity than other types of

criminal offences.

TAX FRAUD - The ML threat associated with Tax Fraud is therefore considered HIGH

1. Mauritius does not appear to be commonly involved in illegal tax evasion schemes.

2. However, there have been detected cases whereby foreign nationals have been suspected of having used Mauritius in order to launder the proceeds

emanating from tax fraud in the jurisdiction of their tax residency.

3. Observed patterns: Suspects use other financial centres in conjunction with Mauritius as part of the schemes to launder proceeds of tax fraud.

4. It should also be noted that tax fraud is often committed alongside other white-collar predicate offences such as embezzlement or misuse of company

assets

SUMMARY OF EXTERNAL MONEY LAUNDERING THREATS

CORRUPTION

1. Mauritius has been associated with various international scandals linked with missing public money that have transited through the Mauritian financial

sector.

� Cases involving politically exposed persons mostly from Asian and African countries have been investigated by Mauritian authorities and information

has been exchanged between Mauritius and foreign authorities in a number of such cases.

2. It has been observed that the financial sector has been abused by international PEPs to invest in countries identified by Transparency International as

highly-corrupted.

Given the value of the suspected proceeds having transited through the financial sector, the ML threat associated with international

corruption is therefore considered HIGH.

PROFESSIONAL MONEY LAUNDERING

1. It has been observed in several cases that Mauritius has been used as a transit destination either by the criminals

themselves or through the use of professional money launderers.

2. The professional money launderers may be foreign-based or locally-based.

3. For the past years, there have been four detected cases of suspected complicit involvement of Mauritian TCSPs in PML.

� By definition, TCSP are in the business of registering and maintaining companies; and serving as nominees for the

companies.

� The threat of PML is therefore higher in the TCSP sector, where operators may knowingly or through deliberate

negligence be involved in the laundering process.

4. Mauritius is usually only one layer in the ML process and the predicate offence is committed in another jurisdiction.

5. In all cases where such transactions were detected, Mauritius fully collaborated with other jurisdictions and

exchanged information.

DIRECTION OF ML THREAT

1. The country is bound to experience both domestic and external ML threats because of:

� its unique and strategic location in the Southern Indian Ocean

� Its international financial centre

2. Countries posing a ML threat to Mauritius

� Mostly from Asian and European countries in relation to proceeds generated from tax fraud

� Some eastern and southern African countries and some Asian countries in relation to proceeds generated from drug

trafficking and fraud.

3. Countries to which Mauritius presents a potential ML threat

� Mostly eastern and southern African countries due to proceeds generated from drug trafficking domestically

On the basis of the relatively significant flows of funds entering the Mauritian financial system and available data,

the level of external ML threat (HIGH) to Mauritius is assessed to be greater than the level of internal ML threat

(MEDIUM).

The Overall ML Threat to Mauritius is therefore MEDIUM-HIGH.

SUMMARY OF SECTORIAL ML THREAT ANALYSIS

High ML Threat Medium-High ML Threat Medium ML Threat Medium-Low Threat

� Banking Sector

� TCSPs

� Money

Changers/Foreign

Exchange Dealers

� Money or Value

Transfer Services

� Gambling Sector

� Securities Sector � Real Estate Sector

� Accountancy Sector

� Legal Professionals

� Jewellery Sector

� Motor Vehicle Dealers

� Domestic Companies

� Insurance Sector

� Credit Unions

� Other Financial

Institutions under FSC

Supervision

ML NATIONAL

VULNERABILITY

NATIONAL ML VULNERABILITY BREAKDOWN

National ML Vulnerability

National ML Combating

Ability

Overall Sectorial ML

Vulnerability

KEY FINDINGS – NATIONAL ML COMBATTING ABILITY

The National ML Combatting Ability is rated at MEDIUM-LOW

1. At the time of the assessment, Mauritius did not have a risk-based Strategic Plan.

2. Need for closer and more effective interagency collaboration.

3. Provide more trainings to ML investigators and prosecutors

4. Management of seized assets - No operational framework for the preservation, protection, maintenance

and realization of property seized.

5. Low reporting culture in DNFBPs. Law amended for proper regulatory framework.

Sector under Assessment Residual ML Vulnerability Rating

1. Gambling Sector High

2. Real estate Sector High

3. Jewellery Sector High

4. Trust and Company Service Providers Medium-High

5. Securities Sector Medium-High

6. Legal professions Medium-High

7. Other Financial Institutions – under FSC Supervision Medium-High

8. Banking Sector Medium

9. Other Financial Institutions – under BoM Supervision Medium

10. Insurance Sector Medium

11. Accountancy Sector Medium

12. Other Financial Institutions – Credit Unions Medium-Low

Overall Sectorial ML Vulnerability was rated at MEDIUM-HIGH and was impacted by the ML vulnerability ratings

associated with the following sectors:

KEY FINDINGS – OVERALL SECTORAL ML VULNERABILITY

OVERALL ML RISK = MEDIUM-HIGH

SECTORIAL ML RISK RATINGSResidual ML

Vulnerability RatingML Threat Rating ML Risk Rating

Gambling Sector High High High

Trust and Company Service Providers Medium-High High High

Securities Sector Medium-High Medium-High Medium-High

Banking Sector Medium High Medium-High

Other Financial Institutions – under BoM Supervision Medium High Medium-High

Legal professions Medium-High Medium Medium-High

Real estate Sector High Medium Medium-High

Jewellery Sector High Medium Medium-High

Insurance Sector Medium Medium-Low Medium

Accountancy Sector Medium Medium Medium

Other Financial Institutions – under FSC Supervision Medium-High Medium-Low Medium

Other Financial Institutions – Credit Unions Medium-Low Medium-Low Medium-Low

+ =

TERRORIST FINANCING RISKS IN

MAURITIUS

TERRORISM THREAT

There has been no terrorist act in Mauritius.

However, the country is not immune from the threat posed by terrorism and violent extremism.

Emergence and rapid spread of extremist ideologies and propaganda, especially through social media

� 2015 - an online propaganda video was released by ISIS, showing a Mauritian combatant

� 2016 - shots were fired at the French embassy in Port-Louis

� Signs of radicalisation and allegiance to terrorist groups in recent years

Based on the above, the overall level of terrorism threat in Mauritius is therefore rated MEDIUM-LOW.

TERRORIST FINANCING THREATS

Directions of Funds

� Authorities have detected several cases of money being transferred abroad where TF was suspected.

� In most suspected cases, the funds were being transferred from Mauritius to overseas jurisdictions.

� The end destination of the funds is believed to be ISIS-controlled territory in Syria.

Identified Sources

� Self-Funding from legitimate sources

� Involvement of family members and associates is also suspected

Identified Channels

� Banks

� MVTS

� Physical Transportation of cash/gold

� NPOs

Based on the above findings, the overall TF threat for Mauritius is MEDIUM-LOW.

TF VULNERABILITY - KEY FINDINGS

The TF vulnerability is rated at MEDIUM-HIGH

Identified Issues

1. Implement the controls mechanism with the new legislation on the NPO sector and more outreach

2. Resources issue – Lack of human resources as well as technical resources has been observed.

3. Need for the setting up of a sophisticated cell focusing on TF related matters at LEA

4. The need for more ongoing trainings to the Law enforcement investigators specially that Terrorist FundingCycle is changing dramatically with the use of emerging technologies worldwide.

OVERALL TF RISK

NATIONAL STRATEGY FOR COMBATTING MONEY LAUNDERING AND THE

FINANCING OF TERRORISM AND PROLIFERATION (2019-2022)

The strategy is based on:

� The findings of the National Risk Assessment (NRA)

� The gaps identified in the AML/CFT Mutual Evaluation Report (2018) of Mauritius

The Strategy describes the priorities and objectives in addressing financial crime, and assists

Mauritius in meeting international obligations set by the FATF

THEMES UNDER THE AML/CFT NATIONAL STRATEGY

Thank You

For more information, please refer to:

� The National Risk Assessment (2019) Public Report on the following

link:

http://www.fiumauritius.org/English//DOCUMENTS/NRA%20FINAL%

20REPORT.PDF

� The National AML/CFT Strategy (2019-22) on the following link:

http://www.fiumauritius.org/English//DOCUMENTS/NATIONAL%20ST

RATEGY%202019-2022_REVISED.PDF